Unclear Asset Ownership Scuttles Capital Raise

Business People Analyzing Statistics Business Documents,  Financial Concept


  • Fintech company wanted to raise $US36 million 
  • Investors wanted it to prove that it owned all intangible assets 
  • Messy construction of software obscured the chain of title 
  • A recent merger added to the confusion 
  • Investors lost confidence and the capital raise failed 


A fast-growing fintech hoped to raise $36 million in Series C funding to drive the company forward. The documentation for the raise depended on the company proving that it owned all its assets – both tangible and intangible.

The Problem

When the company began, its three founders set up an unincorporated entity. Then in the first year of operation, one of the founders departed to pursue his own project. At that point, it was unclear who among the remaining founders was responsible for the various parts of the business. 

These problems were compounded when the remaining founders asked friends, family and contractors to help write the software and perform other labour. A handful of employment disputes also complicated the chain of title even more, as did the widespread use of open-source code (code designed to be publicly accessible).

The Risk

Unlike physical assets, intangible assets can be difficult to inventory and typically aren’t registered on any balance sheet unless they carry patents or trademarks.

In the case of the fintech company, its obscure software ownership was exacerbated when multiple parties, including contractors, became involved in its development. Supply agreements, contractors, employment disputes, restructuring – these can all lead to dangerous chain of title issues.

The Outcome

After the company merged with another firm, its software became a true Gordian Knot of proprietary and open-source code and no one could remember which was which. Because of this complexity, the company was unable to prove ownership of its intangible assets.

The prospective investors decided against giving the company any more money until it could determine the ownership of its intangible assets. The capital raise fell over and the company eventually dissolved ultimately because no one had managed its core intangible assets. 

The Takeout

If you fail to manage and track ownership your intangible assets as the company grows, it can be difficult later to commercialise or sell your intangible assets when looking to scale or exit.   

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